DCIT Vs Union Bank of India (ITAT Bangalore)
ITAT Bangalore Upholds 154 Rectification for Union Bank — Non-Rural Bad Debts Deductible u/s 36(1)(vii); Not a Debatable Issue
Revenue appealed against CIT(A)’s order allowing rectification u/s 154 in favour of Assessee-Bank by treating non-grant of deduction u/s 36(1)(vii) for non-rural bad debts as a mistake apparent from record.
AO had earlier rejected the rectification plea on the ground that the issue was debatable since bad debts of non-rural branches had to be adjusted against provisions made u/s 36(1)(viia). CIT(A), relying on Karnataka Bank Ltd. v. CIT (316 ITR 345), held that non-rural branch debts need not be adjusted against such provisions, & hence the non-grant of deduction was a mistake apparent from record.
Tribunal upheld CIT(A)’s finding. It observed that non-consideration of binding jurisdictional High Court rulings constitutes a mistake apparent from record, relying on CIT v. Saurashtra Kutch Stock Exchange Ltd. & CBDT Circular No. 68 dated 07.11.1971, which clarified that rectification u/s 154 is permissible when later judicial interpretation reveals an error in the earlier order.
Accordingly, ITAT held that the deduction u/s 36(1)(vii) for ₹77.56 crore of non-rural bad debts was rightly allowed through rectification, dismissing the Revenue’s appeal.
